Subs & Suppliers May Lose Lien and Bond Rights on OSU’s “Project One”

Kegler Brown Construction AlertSeptember 29, 2010by Don Gregory

For over a century, subcontractors and suppliers providing labor and material to Ohio's public works have extended credit with the full assurance of lien and payment bond rights guaranteeing payment to those who protect their rights. Those rights are in jeopardy on the much publicized "Project One" at The Ohio State University, a $1 billion hospital project.

Ohio has traditionally done all its public work through multiple prime contractors, such as the MEP trades. However, OSU (as one of three "test" projects) secured permission from the legislature to be exempt from the multiple prime requirement, and is utilizing Turner as the "construction manager at risk" (with design assist responsibilities) on Project One. Many, including the surety industry, thought the legislation left the normal bonding requirement undisturbed. Yet OSU has apparently decided that Turner will not have to provide a payment bond and is arguing that the enabling legislation does not require one. While this issue may ultimately be settled by the courts, subcontractors and suppliers considering extending credit to the project should be cautioned that they may not have payment bond protections, unlike other Ohio public works. This problem is compounded by the fact that Turner is requesting subcontracts be signed that waive lien rights upfront. This means that subcontractors who sign such "no lien" subcontracts may have no lien or bond rights on this sizeable project.

Those contemplating providing labor and material to this job, regardless of tier, are encouraged to give extra thought to payment issues in view of the apparent absence of the usual protections.